Should I enter into a Binding Financial Agreement?
A Binding Financial Agreement (“BFA”) is a written agreement between parties to a marriage or de facto relationship.
Couples can enter into a BFA when they are contemplating marriage or cohabitation (commonly known as a “pre-nuptial agreement”), during the relationship, or following separation. The focus of this article is on “pre-nuptial” agreements.
A BFA can be signed before, during or after marriage or a de facto relationship, meaning that even if you have already married or moved in together, you can still sign a “pre-nuptial” style agreement.
They can be entered into by same-sex or heterosexual couples. Third parties, such as parents who loan money to the couple, can also be a party to the BFA.
They can deal with how the couple’s finances will be dealt with in the event of separation, along with maintenance both during and after the relationship, and any ancillary matters.
A BFA can be a very useful legal resource for couples who wish to promote harmony between them during their relationship and if they separate. There are very stringent legal requirements surrounding BFA’s, the most important being that each party must receive comprehensive legal advice before signing.
Like a marriage, a BFA is an agreement which is both serious and binding, and which must be voluntarily entered into. BFAs are not for every couple, and should not be entered into lightly. Below are some indicators that a BFA may be right for you:
- You wish to avoid court proceedings and associated legal fees in the event of separation.
- You or your partner have children from a previous relationship and you wish to ensure that your assets are protected for their future.
- You or your partner will be bringing a large asset base into the relationship which you wish to protect or quarantine in the event of separation.
- You or your partner are entering the relationship with a large amount of debt that you do not wish the other party to become responsible for.
- You or your partner are engaged in business ventures and you wish to protect your assets in case those business ventures fail.
- You and your partner have had mature and open discussions about finances, and have reached an agreement as to how you will handle your household finances.
- You are comfortable with the agreement reached, and have not been subjected to duress or threats if you do not sign.
- You have fully disclosed your financial position to your partner, and are confident that they have done the same.
There are both advantages and disadvantages to signing a BFA, and there is no “one size fits all” approach. Each BFA must be tailored to meet the specific needs of each particular relationship.
Sometimes it can be difficult to start a discussion with your partner about finances. Many couples attend pre-martial or pre-relationship counselling together as a means of opening the lines of communication. Organisations such as Relationships Australia and private service providers can provide counselling to assist couples with these discussions.
For more information and to find out whether a BFA may be suitable for you, please call Leach Legal on 08 9486 9733 for a free 15 minute telephone consultation with one of our experienced lawyers.